S.S. Narayanaswami Aiyar vs Alamelu Ammal and Another

Somayya, J.—The plaintiff appeals against the decree of the lower appellate Court dismissing his suit for a declaration that he is absolutely

entitled to a certain fund over which the first respondent levied attachment in execution of a money decree obtained against the assets of the second

respondent''s father. The amount in question is about Rs. 1,437 which stood to the credit of Ramakrishna. Ayyar, the .second respondent''s father,

in the hands of a society known as the Bombay Postal Co-operative Society Limited. The deceased Ramakrishna Iyer was a member of this

society. He borrowed certain monies and transferred by way of security two postal life insurance policies. After adjusting the amounts due to the

Bombay Co-operative Society there was a sum of Rs. 1,437-11-0 to the credit of Ramakrishna Iyer. The husband of the first respondent obtained

a decree against Ramakrishna Iyer in 1932 and levied attachment of the amount in question after the death of Ramakrishna Ayyar which took

place on the 20th September, 1938. The attachment was in the year next after Ramakrishna Iyer''s death. The plaintiff is the nominee of the

deceased Ramakrishna Iyer in the Bombay Postal Co-operative Society,

The Society is governed by the Bombay Co-operative Societies Act (VII of 1925). Under that Act a society which has as its object the

promotion of the economic interests of its members in accordance with co-operative principles of a society established with the object of

facilitating the operations of such a society may be registered under the Act. The liability of the members of a society is limited in some cases and

unlimited in other cases. Section 6 deals with a case where the liability of the members of a society is limited by shares. Every member who

becomes a shareholder is entitled to certain rights and privileges and is under certain obligations which are laid down in the Act. u/s 27 of the

Bombay Act, bye-laws are made and one of the bye-laws says that a member may nominate any one he desires as the person to whom in the

event of his death he wishes the sums due to him to be paid by the Society. It would appear that there was a similar rule made u/s 22 of Act II of

1912 which governed the society before the Bombay Act was passed. The plaintiff was nominated by Ramakrishna Iyer the deceased.

Ramakrishna Iyer became indebted to the first respondent''s husband and the latter obtained a decree against Ramakrishna Iyer in 1932. He levied

attachment over this sum of Rs. 1,437-11-0 in 1939. The plaintiff intervened with a claim petition objecting to the attachment, but the claim petition

was dismissed. That has led to the present suit. Both the lower Courts dismissed the suit and hence this second appeal,

The point for determination is whether the amount in question was liable to be proceeded against in execution of the money decree against

Ramakrishna Iyer. Ramakrishna Iyer was a shareholder of the Bombay Postal Co-operative Society. He transferred to the Society evidently by

way of security an asset of his which consisted of certain life insurance policies. This he did when he borrowed some money from the society. After

satisfying the amounts due to the Society there was this sum of Rs. 1,437-11-0 due to the shareholder Ramakrishna Iyer. Ex. P-44 shows that the

society does not claim any right over this fund. In that document the society stated that the sum would be paid as per Section 27(2) of the Bombay

Co-operative Societies Act of 1925 to S.S. Narayanaswami Iyer, the nominee of the deceased, unless orders to the contrary were obtained from

a competent Court of law. The first respondent has levied attachment and the question is whether it is a legal order.

Before we come to this question the plaintiff must show what right he has to maintain the suit. One argument advanced by the learned advocate

for the appellant is that as Ramakrishna Iyer effected an absolute transfer of the insurance policies in favour of the society, Ramakrishna Iyer had

no interest thereafter and that therefore a creditor of Ramakrishna-Iyer has no right to proceed by way of attachment. This argument, if pressed to

its logical conclusion, would lead to the result that the plaintiff has no right to maintain the suit. Only the sum that was due to Ramakrishna Iyer

could be paid u/s 27(2) of the Act to his nominee and if this argument of the learned advocate for the appellant is accepted, namely, that

Ramakrishna Iyer had no interest at all once his insurance policies were transferredabsolutely, the plaintiff will have to be non-suited on that

ground. But the real position seems to be that Ramakrishna Iyer still retained an interest in the pokcies and the transfer was only by way of security

for a loan. As was pointed out above Ex.-P.-44 shows that the sum in question was treated as the sum due to Ramakrishna Iyer. If, therefore this

was a sum due to Ramakrishna Iyer, it is difficult to see how a creditor of Ramakrishna Iyer is not entitled to attach that sum. Sections 25 and 26

of the Bombay Act, which correspond to Sections 20 and 21 of the Imperial Act (II of 1912) and to Sections 22 and 23 of the Madras Act (VI of

1932) are important in this connection. Section 25 says that a society shall have a charge upon the share or interest in the capital and on the

deposits of a member or past member and upon any dividend, bonus or profits payable to a member or past member in respect of any debt due

from such member or past member to the society and may set off any sum credited or payable to a member or past member in or towards

payment of any such debt. Section 26 says that subject to the provisions of Section 25, the share or interest of a member in the capital of a society

or in any provident fund established u/s 41 of the Act shall not be liable to attachment or sale under any decree or order of a Court of justice in

respect of any debt or liability incurred by such member. Reading these sections together the position is this. A shareholder may have certain

shares or an interest in the capital. He may also have certain deposits. There may also be due to him dividends, bonuses or profits. Over all these

sums due to the member the society has a right, i.e, the right to a set off or a charge in respect of monies due to it from the member. When the

legislature came to make a provision against attachment at the instance of the creditor of a member, the legislature took care to say that only the

share or interest of a member in the capital of the society or any provident fund established u/s 41 of the Act shall be exempt from attachment or

sale under any decree or order of a Court. Therefore, if monies due to the member are by way of deposits made by him or otherwise and they do

not answer the description mentioned in Section 26, namely:

the share or interest of a member in the capital of a society or in any provident fund established u/s 41 of the Act,

the creditor is not prevented from attaching those amounts. The question is whether there is any prohibition against the attachment of the sum in

question which was certainly that of Ramakrishna Iyer. Supposing he pledged a jewel worth Rs. 1,000 for a debt of Rs. 200, subject to the right of

the society to get the Rs. 200 with interest and any other sum that may be due to it, the balance will remain to the credit of the shareholder. It may

not be a deposit but it is certainly property transferred to it by way of security. The contention advanced by the learned advocate for the appellant

goes to this length that property given as security and even deposits made by a member in the society are not attachable by his creditors. I do not

think that this result follows. Whatever may be the rights and obligations inter se between the nominee and the heirs at law, it appears to me to be

clear that so far as the creditors, are concerned they are not precluded from levying attachment over such funds. They do not cease to be the

property of the deceased. No decision to this effect has been brought to my notice. The learned advocate for the appellant has drawn my attention

to the decision of Venkataramana Rao,J., in Thiagarajan v. Venkatarama Iyer (1935) 70 M.L.J. 581. The question there related to what would be

really the share capital of a fund. This decision has no bearing on this case. Now, if the appellant''s contention were accepted, a member of such

society has only to deposit all his. earnings in such a society and make a nomination and the result would be that all his creditors will be left without

any remedy and cannot proceed against the deposits made by the borrower in a fund of this kind. In the face of the express provisions of Section

26 of the Act as to what is not attachable, the inference must be that the rest is attachable. Section 25 enacts that a shareholder may have certain

shares or interest in the capital; he may have certain deposits; dividends may be due to him and, as in the case before us, a certain amount may be

due to him as the balance of the proceeds of a particular asset after satisfying the debts due to the society. Of ''hese, only the items enumerated in

Section 26 are exempt from attachment.

Otherwise Section 26 would have been enacted saying that all sums due from the society to a shareholder are exempt from attachment. If a

borrower can prevent his creditors from proceeding against his earnings by the simple device of depositing them in a society of this kind and

making a nomination, it would be a novel method of cheating the creditors.

The appeal is dismissed with costs.